Novo Nordisk bets on new obesity drug recipes

Danish healthcare company Novo Nordisk CEO Lars Fruergaard Jorgensen speaks during the presentation of the 2016 results at the company's headquarters in Bagsvaerd near Copenhagen, Denmark February 2, 2017. Scanpix Denmark/Liselotte Sabroe/via REUTERS

LONDON (Reuters) - Hit by pricing pressure in its core insulin business, Danish drugmaker Novo Nordisk is looking at new treatments for obesity - a major cause of diabetes - to help revive its growth.

New Chief Executive Lars Fruergaard Jorgensen, who took over in January, admits obesity has been a "graveyard" for the drug industry in the past, but he believes a new wave of targeted products that mimic natural hormones now offer real promise.

Novo is building up a industry-leading portfolio of such drugs, with seven obesity compounds in clinical testing, out of 17 experimental medicines overall in trials. Most are still in early-stage development.

Since 2012, rival drugmakers have launched three new anti-obesity pills. However, sales of those drugs - Contrave, Belviq and Qsymia - have been disappointing, given their modest weight loss effects and reluctance by insurers to pay for them.

By contrast, Novo's newly approved anti-obesity injection Saxenda, launched in 2015 and containing the same GLP-1 ingredient as its popular diabetes drug Victoza, has fared better, despite a U.S. price of around $1,000 a month.

Its sales jumped 122 percent to 539 million Danish crowns ($79 million) in the first quarter.

Saxenda only accounts for 2 percent of Novo's overall sales but analysts expect it to sell more than $1 billion by 2023, according to consensus forecasts compiled by Thomson Reuters.

Jorgensen argues Saxenda is just the first step.

"I see a huge opportunity in obesity and I don't see a lot of competitors moving into the space," he told Reuters during a visit to London.

"Obese patients are not hard to identify and diagnose, and they are all waiting for something that works. I think we have some trustworthy bets."

Global obesity levels have tripled since 1980 and only 2 percent of the 600 million people affected are currently treated with an anti-obesity medication.

Novo's next big hope in obesity is an improved GLP-1 drug, semaglutide, that is being tested for both types of diabetes and which could reduce weight significantly more than the 5 to 10 percent seen with Saxenda.

"What will really open the obesity market is efficacy," Jorgensen said. "You probably have to get towards 15 percent for the market to fully open up."

Other early-stage Novo projects use a variety of different natural body signals to control appetite, including the first tri-agonist drug, targeting three different pathways, which recently entered initial Phase I testing.

DIVERSIFYING

Diversifying into "adjacent" areas to diabetes, like obesity, is a key strategic goal for the new Novo boss, who takes over at a challenging time for the drugmaker.

As the world's biggest maker of diabetes drugs, Novo has enjoyed two decades of stellar growth, thanks to rising demand for its products, but a squeeze on prices in the key U.S. market has tarnished its reputation for reliable growth and Jorgensen expects "continued price erosion".

He has said he would consider acquisitions to help fill out the product portfolio, with purchases in the "low single-digit billions of dollars" on the agenda.

Elsewhere, Novo also faces challenges in its haemophilia business, where a new experimental drug from Roche and novel gene therapy treatments threaten to undercut the market for its mainstay product NovoSeven.

Jorgensen is looking for deals to build up the blood products franchise but didn't say when he might make an acquisition.

Earlier this year, Reuters reported that Novo had approached Global Blood Therapeutics about acquiring the U.S. biotech company. However, people familiar with the matter said Novo's offer fell short and the two sides had not been able to bridge the valuation gap. Jorgensen declined to comment.

Last week, the company reported better-than-expected profits in the first quarter and nudged up its full-year target.

($1 = 6.8427 Danish crowns)

Additional reporting by Carl O'Donnell in New York; Editing by Elaine Hardcastle